Falling Lithium Prices and Other ESG-Related News This Week

FactSet StreetAccount publishes regular company-level and summary-style ESG news. Here is this week's recap.

Global lithium prices (brown line) have fallen sharply since mid-November, with analysts citing softer demand for China EVs along with larger inventories of vehicles. Shares of lithium select producers have thus far preserved much of their gains from the rally in the underlying metal which began in 2021 (Figure 1). Share prices of Pilbara Minerals (PLS-ASX, blue line in Figure 2) rose extraordinarily by 20-fold in that period and remain just off their peak.

Figure 1: Lithium Prices Have Sold Off Sharply Following a Two-Year Rally

Lithium prices source: Investing.com and currency converted using FactSet data

Figure 2: Pilbara Minerals Share Prices Have Benefited Strongly From Higher Lithium Prices

Source: FactSet

Thematic performance

• Thematic sectors mostly lower on the week; losses led by EV makers with less established names seeing steepest declines. Rivian fell on $1.3B green bond announcement, and Lucid's pricier offerings struggle with demand amid further Tesla price cuts. EV infrastructure lower on the week in sympathy.

• Solar faring better on big gains from Maxeon on positive Q1 guidance. Sentiment has strengthened around US residential demand with SunRun and Sunnova seeing strong year-over-year originations. A market report showed new US installations fell in 2022, largely due to UFLPA ban on Chinese-made panels, though is set to grow in 2023 on policy tailwinds and supply chain onshoring.

• Lithium prices now down over 40% since 15-Nov-22 highs though analyst perspectives on producers differ. Several miners saw downgrades on weaker EV demand (including Core Lithium, Liontown Resources, and Mineral Resources) though Atlantic Lithium, Leo Lithium, Piedmont Lithium, and Sayona Mining saw positive initiations on expectations of prolonged lithium supply shortfall. Several S.American countries are considering creation of a lithium "cartel" to expand production capacity, a move Sigma Lithium worries could drive away investment.

• The global green subsidy race remains in focus as the EU relaxed state aid rules for green technology, in bid to counter pressure from US incentives. Comes as Volkswagen put planned European battery plant on hold as it eyes $10B in US subsidies; analysis finds two-thirds of European battery production is at risk without incentives and streamlined permitting to counter the IRA. Reports Germany aims to subsidize industrial emission cuts starting next month.

Environment

• The UN reached a historic deal to protect the world's oceans. The High Seas Treaty aims to protect ~30% of seas and limits fishing, deep sea mining and exploration, and shipping lane routes. The final text now requires adoption and ratification by each member nation to take effect, a process that could take years.

• During CERAWeek, more discussion of big energy receiving IRA tax credits for CCS and biofuels, potentially using IRA subsidies to produce dirty hydrogen. While speaking at the conference, incoming COP28 president and oil chief urged the energy industry to reduce emissions.

• In the US, SEC chair Gensler hinted Scope 3 emission disclosures may be scaled back in climate rule. The DoE launched a $6B fund for manufacturing decarbonization, and the EPA proposed rules on coal plant toxic metal release, which could lead to shutdowns.

• In the EU, Germany's last-minute opposition to a ban of ICE vehicles led to a delay in voting so the parties could reach a compromise on e-fuels. Germany plans to ban new oil and gas heating from 2024.

Social and Governance

• Continued attention on railroad safety as the NTSB opened a formal investigation into Norfolk Southern safety practices after five significant accidents; CEO Alan Shaw testifying in Senate hearing Thursday, 9-Mar, over East Palestine derailment. Follows his op-ed about the incident. Major rail companies have since agreed on improved sensor usage.

• Notable regulatory developments this week include the suspension of WANdisco shares in London after significant accounting irregularities and going concern warning. Credit Suisse moved lower after its 2022 annual report was delayed due to last minute SEC inquiry into technical issues. The US DoJ filed an antitrust lawsuit to block Spirit Airlines sale to JetBlue, contending the deal would reduce competition. After pressure from the US, the Netherlands will impose export restrictions on advanced microchip technology to China.

• Attention on collective labor action and workers' conditions as Stabucks CEO agreed to testify before a Senate panel on labor practices after threat of being subpoenaed. Follows ruling last week Starbucks illegally fired six workers in NY state for union activity. BP offshore crews at its North Sea installations set to strike over dispute of pay and overtime rates. The EEOC is suing ExxonMobil for racial discrimination after allegations of egregious instances of racial harassment.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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